Wednesday, May 12, 2010

No consequence if the ECB doesn't pay the Fed back!





Warren Mosler had this posted on his blog. Apparently these are the rules of swap contract that the Fed entered into with the ECB. It seems to suggest that if the ECB doesn't pay the Fed back, then the amount owed is just rolled over into a new swap, which just keeps getting rolled over and rolled over and rolled over?

Where is Congress on this?? Where are the Republicans in Congress?? Why isn't Bernanke out on his ass?? Where are the Tea Partiers? Where's Glenn Beck??

We are such patsies!!! When we help our own people there is outcry. When we give free money to the Europeans that never has to be paid back, no one says a thing!!!

4 comments:

googleheim said...

Marshall plan again

Matt Franko said...

That's ok, if you cant pay it back we'll just roll it over?! LOL, this is getting almost comical!

Mike, I think Ramanan posted a link at TCOTU to the whole document that is here. Just 7 pages.

From reading it, in Sec 2 it looks to me that the Fed made the ECB set up a new account for the Fed at the ECB that would hold the Euros for them this time, I dont think they went that far last time.

Looks like the Fed thinks there is no risk for them because the ECB will always keep an exchange equivalent amount of Euros in an account for the Fed at the ECB, even if the USD are not returned on time by the European bank that was the tru counterparty to the swap.

Mike Norman said...

Matt,

Yes, Bernanke is on the record in Congressional testimony as stating there is no risk. See why I am becoming a Ron Paul accolyte? Abolish the Fed!!

googleheim said...

Don't help detroit, but definitely help the European car makers whose factories are in the South where they rely on Northeastern folks to carry their weight.